Ron Tetleyhttps://rontetley.com
Mon, 11 Feb 2019 14:47:53 +0000en-UShourly1https://wordpress.org/?v=4.9.9GOVERNMENT SHUTDOWN; WHAT WAS IT AND HOW MIGHT IT IMPACT THE ECONOMY?https://rontetley.com/government-shutdown-what-was-it-and-how-might-it-impact-the-economy/
https://rontetley.com/government-shutdown-what-was-it-and-how-might-it-impact-the-economy/#respondMon, 11 Feb 2019 14:47:53 +0000http://rontetley.com/?p=382The news hasn’t been able to say enough about the “government shutdown.” It has been the headline story in many papers and the lead story on many evening newscasts. To say that the government was shut down is something of a misnomer. It was actually a quarter of the government, consisting of about 800,000 employees.

]]>The news hasn’t been able to say enough about the “government shutdown.” It has been the headline story in many papers and the lead story on many evening newscasts. To say that the government was shut down is something of a misnomer. It was actually a quarter of the government, consisting of about 800,000 employees.

The federal government, in large part, gets funded through appropriations determined by the Congress. Not all agencies of the government are funded for the current fiscal year; some are operating under temporary extensions. Those under temporary funding were impacted.

Those federal employees who were affected fell into two groups; those who continued to work with deferred pay and those who were actually furloughed. This includes approximately 380,000 federal workers who were placed on temporary leave without receiving pay. The remaining 420,000 workers are considered “essential” and were required to report to work, even if their paychecks were deferred. The shutdown affected nine of the 15 cabinet-level federal departments, including Homeland Security, Justice, Transportation, Interior, Agriculture and State.

What level of national security?

At the core of the stand-off, between the president some members of Congress, was contention over national security and a border wall. In 2016, more than 63,000 Americans died from opiate overdoses. More than 90 percent of cocaine and heroin comes into the U.S. across the U.S./Mexico border.

The deaths of many American citizens have been at the hands of illegal aliens. A recent example was the murder of Stanislaus County, California police officer Ronil Singh, who was gunned down by an illegal alien who had been using three different aliases. That man, Paulo Virgen Mendoza, was aided by seven other illegal aliens in an attempt to evade capture and return to Mexico. A president’s first duty is to protect the American people.

A wall is the only security measure that acts as an impediment and not just a source of notification that someone has crossed into the country. The president wants a wall and Congressional Democrats and some Republicans would prefer that funds are spent on sensors, cameras and high-tech alert systems, but not a wall. The president is asking for $5 billion to initiate the project and Democrats in the House are offering $1.5 billion that cannot be used for a wall.

For the time being, the “shutdown” is over. The president effectively ended it, giving Congress time to work out a deal that satisfies both him and the Democrats. As was the case with federal worker’s pay, the stand-off has been deferred for now; the can has effectively been kicked down the road.

The Congressional Budget Office (CBO) estimates that the shut-down will have a minor impact on the economy for 2019. According to the CBO’s estimate, “the partial shutdown delayed $18 billion in federal spending and suspended some federal services, thus lowering the projected level of real GDP in the first quarter of 2019 by $8 billion (in 2019 dollars), or 0.2 percent.”
The office further estimates that the shutdown impacted the fourth quarter GDP of 2018 by 0.1 percent. They report that the GDP for the full year 2019 is “expected to be 0.02 percent smaller than it would have been otherwise.”

The government shutdown was not the first and will most likely not be the last. It does point out the importance of maintaining an emergency fund and having a contingency plan in place for periods without income. Many federal workers were relying on social service organizations for help.

]]>https://rontetley.com/government-shutdown-what-was-it-and-how-might-it-impact-the-economy/feed/0GROWTH VS VALUE STOCKS PERFORMANCEhttps://rontetley.com/growth-vs-value-stocks-performance/
https://rontetley.com/growth-vs-value-stocks-performance/#respondMon, 28 Jan 2019 14:33:29 +0000http://rontetley.com/?p=378For many astute investors, there are often two schools of thought on stock selection; value or growth. Many investors ascribe to the value school because they like the idea of buying out-of-favor stocks that might have had a temporary set-back but could offer a lot of upside. They are more likely to pay dividends and

]]>For many astute investors, there are often two schools of thought on stock selection; value or growth. Many investors ascribe to the value school because they like the idea of buying out-of-favor stocks that might have had a temporary set-back but could offer a lot of upside. They are more likely to pay dividends and may also be more appealing to those who are risk-adverse.

The growth stock camp believes that the stocks they choose offer growth because of profit or revenue growth. These companies reinvest earnings back into the company. The growth camp is often willing to take on a little additional risk and forego dividends in the hopes for a respectable upside. They often also need to be a little more risk tolerant and ride out more potential volatility.

The tug-of-war between these two investment philosophies have waxed and waned over the years, as institutional and retail investors take sides during any market cycle. Upside potential, earnings and risk profiles all play into the decision to choose one approach over the other.

Many famous investors have fallen on either side of these strategies with Warren Buffett and John Neff on the value side and Thomas Rowe Price, Jr., a fan of the growth approach. Investor Peter Lynch would adapt whichever of these approaches worked best at the time.

The U.S. stock market continued its climb until late September. That is when the trend started to reverse and more downside volatility entered the markets. There was a correction in February with a subsequent recovery. Volatility continued, but with a steady rise starting in the Spring with bouts of downward pressure. After September 20, the rollercoaster ride saw more peaks and troughs until it plunged in December. Some end-of-year rallies saw some recover after Christmas with a record-breaking day and increase of more than 6 percent between December 26 and 28.

Riding the Wave; Big Tech

During much of the stock market run-up in 2018, growth stocks have beaten value stocks. Since 2007, growth has outpaced value stocks by a wide margin. That hasn’t been consistent in every year, with value outpacing growth in 2012 and 2016.

Through mid-July of 2018, the growth sector has outpaced value by more than 11 percent. Much of the credit for this lead can go to the popular tech stocks that have exhibited tremendous rallies.

It is believed that rising interest rates can benefit value stocks and interest rateshave been creeping up.

Value stocks are often favored by those who are less certain about the trajectory of the market in the future.

Investors who include some investments utilizing both of these styles can benefit by having a diversified portfolio. After all, nobody can look into the future, so bringing some balance to a portfolio considers any eventuality.

Warren Buffett, the value investing devotee once said; “”Be fearful when others are greedy and greedy when others are fearful.” Only time will tell.

]]>https://rontetley.com/growth-vs-value-stocks-performance/feed/0HOW DID RETAILERS FARE DURING THE HOLIDAY SEASON?https://rontetley.com/how-did-retailers-fare-during-the-holiday-season/
https://rontetley.com/how-did-retailers-fare-during-the-holiday-season/#respondTue, 15 Jan 2019 18:22:13 +0000http://rontetley.com/?p=376There was a time when everyone went to the mall to shop. Brick and mortar was the only choice and stores were crowded as a result. When online shopping first appeared, people were skeptical and weary of providing their credit cardinformation or trusting any part of the process. Amazon was making some strides early on with

]]>There was a time when everyone went to the mall to shop. Brick and mortar was the only choice and stores were crowded as a result. When online shopping first appeared, people were skeptical and weary of providing their credit cardinformation or trusting any part of the process. Amazon was making some strides early on with gaining market share, but the appetite for the Internet and shopping had not yet caught on.

Those first transactions officially began in 1994, a year before Amazon opened its doors. What prompted most of the shopping from home that year was catalog and TV shopping channel purchases over the phone. Incredibly, that year, there were 98 million consumers who purchased $60 billion of goods from home. Calling an 800-number was the first foray into shopping from home before the real concept of ecommerce exploded.

The Internet was still largely a mystery to many back then and the equipment used to connect to the Internet was not commonly understood. Electronic shopping malls were soon to follow and ecommerce became more accepted in the subsequent two decades.

During 2018, the end-of-the-year holiday season saw sales up 5.1 percent over the previous year to $850 billion. This was the best season in six years. Sales over the Internet increased 19.1 over 2017.

The big winners were clothing and home improvement items. Home Depot Inc and Lowe’s saw sales increase by 9 percent along with their counterparts in that sector. Electronics were off slightly after enjoying some spectacular years.

Conversely, department store sales were down and growth was only at an anemic 1.3 to two-percent during the past three years. Store closures helped to weigh down this number.

Brick and mortar store’s Internet sales still remained strong though. Many people conduct all of their shopping online and skip the check-out lines and crowds. That is the trend and the discounts, convenience and assortment offered online is winning out.

Several retailers have adopted a hybrid mode where customers can order off of their websites and pick up the items locally at a retail outlet. Large retailers like Walmart and Target have increased utilization of this one-off ecommerce practice and Walmart has even added grocery shopping to the mix. These pickup sales have increased by 47 percent over 2017, according to Adobe Analytics.

The 2018 holiday season was the best for online retailer Amazon, according to the company’s Worldwide Consumer Division CEO, Jeff Wilke.

With consumer confidence remaining high and competition leading to lower prices, retail sales have seen a banner year. For ecommerce, the trend over the past 25 years has been towards more acceptance, more participation and more ease-of-use.

]]>https://rontetley.com/how-did-retailers-fare-during-the-holiday-season/feed/0WHAT IS HAPPENING WITH OIL PRICES?https://rontetley.com/what-is-happening-with-oil-prices/
https://rontetley.com/what-is-happening-with-oil-prices/#respondMon, 07 Jan 2019 18:19:33 +0000http://rontetley.com/?p=374The price of oil crashed in late 2014, prompting the Organization of the Petroleum Exporting Countries (OPEC) to begin a price war to regain lost market share. Besides losing market share to other countries outside its own cabal, OPEC was losing share to the United States. During November, oil prices dropped almost 22 percent, which

]]>The price of oil crashed in late 2014, prompting the Organization of the Petroleum Exporting Countries (OPEC) to begin a price war to regain lost market share. Besides losing market share to other countries outside its own cabal, OPEC was losing share to the United States.

During November, oil prices dropped almost 22 percent, which represented the largest monthly percentage drop in 10 years. In response, OPEC may cut production. This cut could represent over a million barrels a day. Oil prices had reached a four-year high in early October.

A strange thing happened on the way to the forum, or at least, between the distillery and the gas pump. The United States went from being dependent on oil from the Middle East to being the worlds largest oil producer. It happened very subtly, without much fanfare and it was mostly predictable by those who were believers in the U.S.’s potential to be an oil producing powerhouse.

While many geopolitical events have contributed to a rise in the price at the pump, the pain felt there could have been so much worse if the U.S. hadn’t made such a big shift in its dependency on the oil-rich counties. For the first time, since 1973, the U.S. reigns supreme in crude oil production.

U.S. Oil Producing Powerhouse

Oil production in the U.S. has increased since 2011. Most recently, growth in production has increased in western Texas and eastern New Mexico. There has also been increased production in North Dakota and Montana and the Gulf of Mexico.

Over the past decade, U.S. oil production has more than doubled. This is largely due to the boom in shale oil production. The largest area for shale oil production is in the Permian Basin in western Texas. U.S. oil production was 11 million barrels a day by August 2018. Estimates by the Energy Information Administration is that the U.S. will continue this dominance through 2019, beating both Russia and Saudi Arabia.

Over the next seven to 10 years, U.S. production is forecast to hit 15 million barrels a day according to some industry experts. What further enhances U.S. oil production is that America has oil customers around the world. Late in 2015, Congress lifted a 40-year ban on the exportation of crude oil.

U.S. exports take oil to China, South America and Europe.

A couple of the reasons for the U.S. leap-frogging the historic oil production leaders is the use of fracking and technology.
Fracking has unlocked large quantities of oil and natural gas from underground sources. Technology advances in drilling have allowed for cost reductions that have helped the industry.

The only thing that hand-cuff’s America’s booming production is a lack of supplies and workers. On the plus side is that the U.S. is not beholden to a Middle East with its inherent conflicts and problems.

]]>https://rontetley.com/what-is-happening-with-oil-prices/feed/0SOME OF THE FANGS HAVE COME OUT OF THE FAANG’Shttps://rontetley.com/some-of-the-fangs-have-come-out-of-the-faangs/
https://rontetley.com/some-of-the-fangs-have-come-out-of-the-faangs/#respondMon, 17 Dec 2018 14:42:03 +0000http://rontetley.com/?p=372There’s a strange phenomenon in the stock market that recurs from time to time. A popular stock, that has become a megastar and is shooting for the moon, suddenly falls back to earth; at least part way. The luster becomes tarnished. This is why former Fed Chairman Alan Greenspan coined the phrase “irrational exuberance.” He was speaking

]]>There’s a strange phenomenon in the stock market that recurs from time to time. A popular stock, that has become a megastar and is shooting for the moon, suddenly falls back to earth; at least part way. The luster becomes tarnished.

This is why former Fed Chairman Alan Greenspan coined the phrase “irrational exuberance.” He was speaking of the entire market, but to some degree, individual stocks inspire the same enthusiasm. They may or may not have the greatest valuations, but they are most often exciting companies that have achieved great things. Greenspan used the term in 1996 regarding the tech stock run-up, but it would take another few years before the prediction saw real consequences.

And so it has been, with the prestige and reverence paid to the FAANG stocks; the high-flyers who have rewarded investors well and seemed to be on a dizzying trajectory. Who can argue that these market leaders, who have captured so much market share and distinguished themselves as stalwarts of growth and reward, did not deserve investor interest?

The FAANG stocks include Facebook, Apple, Amazon, Netflix and Google’s parent company Alphabet. They are all household names and brands with a powerful following, great services and products.

Through October, the FAANG stocks continued to perform and dazzle investors and new products and services seemed to help bolster their continued success.

Every Rally has a Hiccup

But, the stock market if fickle. There are no guarantees; only educated guesses. If a stock begins to appear overvalued or there are alternative safe-havens that look more inviting, the trend for that stock can reverse or correct.

During November, through the third week in the month, Netflix had lost 35 percent, Amazon was off by 26 percent and Facebook had fallen 40 percent. Facebook traded at $217.50 on July 25 and was sitting at $131.73 by November 23. Amazon hit $2,039.51 on September 4 and fell to $1,502.06 by November 23, with some new gains after exhibiting strong pre-holiday sales figures.

Apple, with its introduction of three new models recently, had hit $232.07 on October 3 and then fell to $172.29 by November 23 as the market questions the sales success of the new offerings. The company was forced to offer discounts to carriers after sales proved weaker than expected. Apple is also increasing their trade-in incentive. To placate nervous investors, Apple claims that their new XR model is the company’s best-selling iPhone. The iPhone represents 60 percent of Apple’s revenues.

For several of the FAANG companies, some of the luster has worn thin as there have been hints of corruption, questionable tactics for treating some socialmedia participants or arrangements with local governments that include overly-generous incentives. After having most of the public behind them, as pillars of the community who could do not wrong, even some groups of employees rebelled publicly.

It may not be irrational exuberance to invest in market share leaders, but an occasional pause, and reassessment, is always healthy.

]]>https://rontetley.com/some-of-the-fangs-have-come-out-of-the-faangs/feed/0WHAT IS GOING ON WITH BREXIT NEGOTIATIONS?https://rontetley.com/what-is-going-on-with-brexit-negotiations/
https://rontetley.com/what-is-going-on-with-brexit-negotiations/#respondMon, 03 Dec 2018 14:36:49 +0000http://rontetley.com/?p=369“Don’t let the door hit you on your way out.” That is an old adage that has been used sarcastically when someone’s exit is mocked. Symbolically, Europe is telling Great Britain just that as fair warning to any other member of the European Union (EU) who might consider an exit. Brits voted in 2016 to

]]>“Don’t let the door hit you on your way out.” That is an old adage that has been used sarcastically when someone’s exit is mocked. Symbolically, Europe is telling Great Britain just that as fair warning to any other member of the European Union (EU) who might consider an exit. Brits voted in 2016 to make their exit from the EU amid protests and inter-regional disagreement.

With the complexity of the original agreement, 45 years ago, the exit from this agreement has made Brexit a challenging event on many levels; politically, economically, socially and legally. While the United Kingdom (U.K.) remains a part of the EU for now, the timeline for negotiating a deal is drawing near.

For many Brits, the European Union proved too expensive to belong to, did not offer sufficient vetting on uncontrolled immigration and was out of touch. Their discontent mounted with repeated terrorist attacks within their borders.

Another thing that joined most of the EU nations was adoption of the euro. Only the U.K., Sweden and Denmark decided against using the currency.

The European Union, as a free-trade zone and a 28-nation bloc, has had the strength of numbers in trade deals and dealing with member’s financial challenges. There has been some other benefits as well to the agreement, as seen in the bail-outs of Greece, Portugal, the Irish Republic and Spain in the recent past. The EU survived a debt crisis by shoring up member countries.

The Negotiations

Negotiators from both sides have been hammering out a post-Brexit relationship and trade agreement. They also have to formally approve of the exit from the EU, regardless of the vote in the U.K.

The exit by the people of the United Kingdom provided their own set of challenges, both in trade and political relationships. The most recent reports claim that the two sides are making “headway.” That was followed by suggestions that Prime Minister Theresa May and her European counterparts in Brussels, have come to an impasse.

The complexity of an exit from the EU includes getting it ratified in all 27 EU Parliaments and the British Parliament and the European Parliament. Since the deadline for the full British exit from the EU is the end of March, 2019, the components should be worked out before mid-November, according to the principals. On top of a complicated agreement, the language of the agreement has to be translated into two dozen languages. That process will take time.

Part of the delay in getting to this point has been the lack of agreement within the United Kingdom. There are disparate factions who see the terms of the exit much differently. It was just recently that the Prime Minister came up with a proposal that provided some basis for getting the negotiations moving forward.

Another issue that complicates the negotiations is that the country of Ireland is divided between Northern Ireland, part of the U.K., and Ireland, part of the EU. How do you handle the border without impacting the local culture? Another point of contention is around customs arrangements and regulations.

Also, some who were opposed to Brexit in the first place, have attempted to undermine the negotiations. They claim that the British Parliament may call for another general election on the subject or an election to vote on the options negotiated by the Prime Minister. Keep watching the developments because Brexit isn’t a done deal yet.

]]>https://rontetley.com/what-is-going-on-with-brexit-negotiations/feed/0WHAT IS HAPPENING IN TURKEYhttps://rontetley.com/what-is-happening-in-turkey/
https://rontetley.com/what-is-happening-in-turkey/#respondMon, 22 Oct 2018 13:44:57 +0000http://rontetley.com/?p=367Geographically, the country of Turkey stands in an interesting location, straddling two continents, with Eastern Europe at one door and Iran at the other. It has a colorful past with historic roots in the Ottoman and Byzantine empires. It shares borders with Syria, Iraq, Armenia, Georgia, Bulgaria and Greece. Most of the country is considered

]]>Geographically, the country of Turkey stands in an interesting location, straddling two continents, with Eastern Europe at one door and Iran at the other. It has a colorful past with historic roots in the Ottoman and Byzantine empires. It shares borders with Syria, Iraq, Armenia, Georgia, Bulgaria and Greece. Most of the country is considered to be a part of Asia.

The country is on the verge of economic collapse with the Turkish lira dropping 40 percent in value against the U.S. dollar. Turkey’s president Recep Tayyip Erdogan has blamed his country’s problems on U.S. sanctions, but many economists blame Erdogan himself, and his zeal for big infrastructure projects with borrowed money, and his basic misunderstanding of economics, for what is largely a homemade crisis.

The Erdogan government believes that a failed coup was attempted in 2016. This has resulted in the capture and jailing of a large number of people suspected of being part of the coup. In many cases, these have been people who played no role, but who might have banked with a particular bank or subscribed to a particular newsletter.

The Turkish government has blamed the coup on the Fethullah Gülen movement.

So, in addition to economic collapse, Turkey is in a state of social and political unrest because of suspicions and arrests surrounding this perceived anti-Erdogan movement. There have been arrests and imprisonments of soldiers, journalists, lawyers and judges. Many other people have also lost their jobs simply because of suspicion of involvement.

Turkey also faces the prospect of a mass exodus of refugees from the Idlib region of Syria if Russian and Syrian forces, backing Bashar al-Assad, should lead an assault against those involved in an uprising. This could mean as many as 800,000 refugees attempt to enter Turkey.
Turkish forces now man observation posts in the Idlib region.

Detaining an American

Amid all of this turmoil, Turkey is holding American pastor Andrew Brunson captive. Brunson was imprisoned during the fallout after the 2016 coup. Although the North Carolina pastor was only in the country as an evangelical Christian, the Erdogan government accused him of aiding terrorist groups.

The 50-year old pastor was recently transferred to house arrest in Turkey. Other Americans have been held in Turkey with similar charges.

Pastor Brunson ran a small church in the city of Izmir on the Turkish coast. He was arrested in October of 2016. He was in failing health in prison.

The imprisonment of the American has caused strained relations between the two NATO allies. The American administration has let up on the pressure lately because of fears that the economic problems in Turkey could spread and be detrimental to world economics. Securing the freedom of the American detainees is a priority though.

With hopes that the standoff may be moving toward resolution, the Turkish Lira has been bolstered in recent days.

]]>https://rontetley.com/what-is-happening-in-turkey/feed/0WHAT IS HAPPENING WITH U.S. AND CHINESE TARIFFS?https://rontetley.com/what-is-happening-with-u-s-and-chinese-tariffs/
https://rontetley.com/what-is-happening-with-u-s-and-chinese-tariffs/#respondMon, 08 Oct 2018 14:04:33 +0000http://rontetley.com/?p=365The U.S. buys a lot from China. That may be the understatement of the year. The number is actually a half a trillion dollars annually. That is a very big number, even by Washington’s standards. It may seem like just about everything that we buy as American consumers is made in China and that isn’t

]]>The U.S. buys a lot from China. That may be the understatement of the year. The number is actually a half a trillion dollars annually. That is a very big number, even by Washington’s standards.

It may seem like just about everything that we buy as American consumers is made in China and that isn’t far off base. Cell phones, computers, toys and furniture are some of the leading imports and the first two make up the biggest percentage of imports.

The problem is that the Chinese government does not want to reciprocate. China imports about $15 billion annually of U.S. farm crops such as soy beans and $10.5 billion of transportation equipment such as airplanes. They also import about $7 billion annually of oil and gas products.

While much of the attention in talk of a “trade war” has centered on steel and aluminum, those two products represent a small portion of total imports compared to cell phones and computers. Cell phones alone account for nearly $84 billion.

This year, Chinese imports from the U.S. could hit $150 billion. That would be a big improvement over the past five years. The imbalance in trade becomes very apparent when you compare the numbers and realize that the U.S. imports cell phones amounting to more than half of all the imports China buys from the U.S. This imbalance was a common theme on the campaign trail for the president.

The concern, among manufacturers and many consumers, is that as China also raises tariffs, a protracted trade war would raise consumer prices on a myriad of goods.

Because Americans like affordable products, and China has filled that need over the years, the imposition of tariffs will increase the costs of those products driving the manufacturing to other countries. China ends up the net loser in this scenario even though American consumers may be stuck with a higher price tag on many goods during an interim period.

What Products will Receive New Duties?

In terms of the tariffs themselves, the U.S. has imposed tariffs on $200 billion of Chinese imports. In retaliation, China has imposed new tariffs on $60 billion of U.S. exports. The additional Chinese tariffs target natural gas, small aircraft, chemicals, meat, wine, wheat and textiles. Previously, China had imposed new tariffs on $50 billion of U.S. products.

The new U.S. tariffs apply to nearly 6,000 Chinese imports, including handbags, textiles and rice. The U.S. has not imposed tariffs on cell phones.

This round of tariffs will be the third for the U.S. against Chinese imports. The new tariffs now impact half of all Chinese imports. The U.S. removed planned tariffs on many imports including smart watches, baby car seats, bicycle helmets and high chairs.

The hope is that a fairer trade agreement will be struck with China allowing for more balance. If American companies shift the country of manufacture of their goods, then China will lose billions.
Right now, it is a stalemate and we wait to see who blinks first.

]]>https://rontetley.com/what-is-happening-with-u-s-and-chinese-tariffs/feed/0GOLD PRICES HAVE BEEN PLUNGING; WHAT IS CAUSING IT?https://rontetley.com/gold-prices-have-been-plunging-what-is-causing-it/
https://rontetley.com/gold-prices-have-been-plunging-what-is-causing-it/#respondMon, 24 Sep 2018 14:18:57 +0000http://rontetley.com/?p=363When the world becomes filled with more uncertainty and markets become more volatile and geopolitical unrest is afoot, gold is considered a safe harbor. During volatile markets of the recent past, many investors have been driven to gold by putting at least a portion of their portfolios into the precious metal. In the past, it

]]>When the world becomes filled with more uncertainty and markets become more volatile and geopolitical unrest is afoot, gold is considered a safe harbor.

During volatile markets of the recent past, many investors have been driven to gold by putting at least a portion of their portfolios into the precious metal. In the past, it was a safe haven during times of high inflation.

In the first half of August, the price of gold hit an 18-month low. That trend happened concurrently with the strengthening of the U.S. dollar.

A downtrend had begun in 2013, but saw some reversal in 2014 and the first half of 2015. After peaking in 2011, when there was more uncertainty in the economy, gold prices were volatile. Decisions by the Federal Reserve also impacted gold prices during this time. Quantitative easing, which was a fed initiative in reaction to the 2008/2009 financial crisis, was being “tapered” and things had turned a corner.

This year, gold has been down about 9 percent. Gold mining stocks have taken a hit as well. That trend only reversed in late August as the Federal Reserve made it clear that their plan for gradual rate increases would remain in place; no overheated economy. Gold is usually priced in dollars and as the Fed raises rates, more of the safe haven investments will find their way to treasuries.

Despite trade tensions, the actions of the Federal Reserve take precedent for most investors who look to gold.

By the end of August, the price had broke above the $1,200 dollar mark because of a weaker dollar. Prices were up 4 percent since hitting the year’s low in early August. That rally did not continue after a weekend though.

Less Reason to Rely on Gold

The reason for gold’s decline may not be so much that investors are losing interest in the precious metal as there are fewer reasons to seek a safe harbor. Many of the uncertain geopolitical events that spurred the sales of gold in the recent past, and increased its price, have fallen by the wayside.

The financial crisis that struck Greece, Spain and Portugal has been largely mitigated. Talks with North Korea have eased tensions on the Korean peninsula and the South China Sea. Also, the U.S. and Mexico came to an agreement on trade. The rally in the equities markets have attracted more of each investment dollar with less directed at a hedging strategy like gold.

There are also markets like cryptocurrencies that may be funneling off some of the investments normally allocated to gold.
Most of the world’s demand for gold comes from India and China. They are responsible for 45 percent of the world’s demand for gold jewelry and gold bars.

Going into the holidays, gold sales increase, and demand for the precious metal gets a slight jolt to the upside. Other than that, a flight to safety, and a volatile environment for equities, may be the only things to re-stimulate the big investments in the shiny stuff. Those things can always reemerge.

]]>https://rontetley.com/gold-prices-have-been-plunging-what-is-causing-it/feed/0S&P 500 – LONGEST BULL MARKET IN HISTORYhttps://rontetley.com/sp-500-longest-bull-market-in-history/
https://rontetley.com/sp-500-longest-bull-market-in-history/#respondMon, 10 Sep 2018 14:13:47 +0000http://rontetley.com/?p=361Strong economy, strong market; that seems to be the rational that can explain the market surge as of late. The S & P actually hit an all-time record high on August 24, 2018. The Nasdaq Composite followed suit. The market’s gains were broad-based. Running for the past nine and a half years, the Standard and

]]>Strong economy, strong market; that seems to be the rational that can explain the market surge as of late. The S & P actually hit an all-time record high on August 24, 2018. The Nasdaq Composite followed suit. The market’s gains were broad-based.

Running for the past nine and a half years, the Standard and Poor’s 500 Index has risen 325 percent. In that time, the Dow Jones Industrial Average is up 294 percent and the Nasdaq Composite is up 526 percent.

This year, the Dow had been in correction territory for around six months and emerged from it on August 27. This was the longest stretch of days at these levels since 1961. The market had entered correction territory on February 8. On August 27, the Dow hit 26,049.

There are some analysts on Wall Street who argue that the bull market of the 1990s remains the longest bull market. Some others argue the exact date when the current bull market began. But, most agree that on August 24, the market hit a record.

Part of the success of this long market can be attributed to good monetary policy in past years and great fiscal policy currently.

This Year’s Market

When even the Federal Reserve says that the economy looks “strong,” then Wall Street feels compelled to push the market higher. And, that is what has happened. The Fed also stuck to their guns and kept to a modest rate increase projection for the balance of 2018. The fact that the fed chair did not take a more hawkish position told Wall Street that inflation remains largely under control.

Good corporate earnings, a pro-business environment and a strong economy have all worked well to continue the rally in equities that has been going on for nearly a decade.

A trade agreement, hammered out with Mexico, also excited investors, sending the Dow up another 259 points on August 27. The agreement calls for producing more automotive parts in the U.S., among other things.

Before this lengthy bull market, the next longest market ended in March of 2000. But, the market’s PE (price/earnings) ratio this time around looks much more attractive. Stocks are more fairly valued and interest rates are lower than during the last rally.

The gains more recently have been largely in domestic equities with emerging markets not as strong.

On August 24, the Dow Jones Industrial Average hit 25,790.35.
Stimulus efforts taken by the administration have had a positive impact on the supply side, and businesses have invested in technology and equipment, with better productivity growth as a possible result. This scenario was seen in the late 1990s.

Consumer spending has been strong and many retail stocks have reflected this in their earnings. These things have help bolster the rally in the market, despite some volatility along the way.